Global business expansion is becoming increasingly attractive for South African startups with the country’s economy expected to grow by less than 1% this year while the African Development Bank predicts Africa’s average growth to be 3.7% this year, and The United Nations predicting the global outlook to reach 2.4%.
Breaking into the African and global business market can mean big opportunities for local startups, but the risks can be daunting with even big companies facing risks in their expansion strategies. It is therefore, important that SMEs get the basics right to stand a chance at success.
To discuss some of the biggest pitfalls SME owners have to avoid when taking their business into the rest of Africa or the world, SME South Africa speaks to 5 business leaders and experts about how to draft a successful expansion strategy and why it’s important to have a comprehensive understanding of the market you are going into.
Kay Vittee, CEO of Quest Staffing Solutions. Amongst her many personal recognitions is the Top Woman Award for outstanding contribution to the empowerment of women, and the DTI’s – CEO’s Leading the Way Award, for her commitment to advancing equality between women and men in business.
Mohale Ralebitso is the founder and chairman of Itataise Investments and CEO of the Black Business Council. He is also former Marketing Communications and Corporate Affairs Director on the Old Mutual Emerging Markets Exco with responsibility for brand, marketing, customer segmentation and customer value propositions design [CVPs] and market engagement across SA, Africa, Colombia, Mexico and India and China.
Jenny Retief, CEO of Riversands Incubation Hub, has experience as both a corporate leader and successful entrepreneur. Retief is the first CEO of Riversands Incubation Hub, a ground-breaking, large-scale initiative aimed at sparking economic growth and providing support for small business owners.
Vika Mpisane, CEO of ZADNA, has broad experience in policy development in areas such as trade and industry, economic policy, labour, education and ICT development.
Rick Ed, is a business mentor and advisor at Do Better Business which offers mentoring and business support on topics such as marketing, management and leadership to SMEs and entrepreneurs.
5 Big mistakes you should avoid if you are scaling your business internationally or across the continent.
1. MAKING ASSUMPTIONS
Watch: Rick Ed, Kay Vittee and Jenny Retief on why making assumptions is one of the worst mistakes you can make
The wrong assumption is easily the surest way to make sure your business does not make it when scaling abroad. Make sure there is a market for what you have to offer, says Ed, while Vittee advises that you need to understand the context that drives the market as one of your first steps.
2. NOT UNDERSTANDING THE LAW
Watch: Mohale Ralebitso and Kay Vittee on why not understanding the legal framework and context can put your business in a bind
The legal framework forms the basis for most if not all business transactions and has the potential of terminally affecting the business if not complied with. As businesses such as MTN have experienced, having a firm grasp of legal requirements is critical.
Ralebitso says not only will understanding the law help you enforce contracts, it can also help you with your pricing as it forces you to take into account factors such as taxation requirements.
3. NOT STARTING LEAN
Watch: Rick Ed and Vika Mpisane on why you should carefully pace your expansion strategy
Moving into a foreign country is a massive investment and businesses do not have the luxury of jumping in with both feet, Ed says.
4. NOT UNDERSTANDING YOUR MONEY MATTERS
Watch: Vika Mpisane and Kay Vittee on the financial questions to ask before you go global
Expanding internationally and across borders is also a financial issue, and you need to understand the financial implications completely, says Vittee.
She says questions you need to ask include: “What are the payment terms and what cash flow do you need?”
See also: 11 Reasons to Love your Competitors
5. DON’T GO AT IT ALONE
Watch: Rick Ed, Jenny Retief and Mohale Ralebitso share their thoughts on what’s in it for you if you partner with local talent
It is almost impossible to go into a foreign country and immediately understand what the people on the ground want. Going into a foreign market without a deep understanding of the local market is another mistake that has cost a number of companies dearly. Teaming up with people who understand the landscape, is the way to go, says Retief.
“It’s also a natural way to have somebody who partners with you who has access to local networks and you don’t want to have the same experiences that we would have if an international company came to South Africa and didn’t have local partners,” adds Ralebitso.